AI, geopolitics could erase 50% of tech services enterprise value: Report

The global technology services industry is entering a period of significant instability, with new research from Bain & Company cautioning that companies maintaining business-as-usual operating models could see revenue fall by 30% or more. The report, 'The New Growth Equation for Tech Services,' notes that sector-wide margins have already declined by over 200 basis points, while valuations have dropped back to pre-pandemic levels.

“Technology services firms stand at a defining moment,” said Kushal Raja, partner at Bain & Company. “AI and other structural shifts are redrawing the industry’s growth map. The next wave of winners will be those that reimagine strategy using a micro-battle approach, leverage AI to transform processes and move to platform-based value-driven delivery. They are the ones that lead the way in revamping their talent and culture models to fully capture the value of this change.”

The report identifies artificial intelligence as the most consequential source of disruption, but emphasises that economic nationalism, demographic changes and the energy transition are also forcing structural shifts. According to Bain, these pressures are reshaping how technology services providers compete, manage operations and deliver value.

At the same time, the analysis highlights areas of emerging opportunity. Demand is increasing for capabilities in data operations, systems modernisation and chip design, alongside renewed focus on legacy platform transformation. As more enterprises adopt AI-first operating models, the report notes, new technology-enabled transformation mandates are emerging across industries.

Bain’s modelling suggests that without strategic transformation, firms could lose 5 to 7 EBIT margin points due to increased deal discounting, potentially contributing to enterprise value erosion of up to 50% over the next five years. Conversely, companies that overhaul offerings, delivery, talent and pricing structures may achieve 8% to 10% growth, maintain or expand margins, and increase revenue multiples threefold.

The report outlines eight imperatives for providers seeking to remain competitive, including shifting strategy toward targeted “micro-battles,” building multiservice solutions, adopting platform-based delivery, moving to value-based pricing, rethinking talent models and resetting organisational culture toward agility and technical depth. The recommendations also call for stronger partnerships and targeted M&A to accelerate differentiation.

Bain states that firms will need to deploy AI extensively within their own operations, not only in client-facing services. A zero-based redesign of internal processes, with AI embedded throughout, could improve margins by 200 to 300 basis points, the report adds. Such gains could then be channelled into innovation, delivery and talent development.

The findings conclude that technology service providers that take decisive action—prioritising high-impact niches and building specialised expertise—will be better positioned to withstand disruption and capture the sector’s next phase of growth.